By Peter McKay
Investors turned the page on a dismal January performance for
stocks Monday, prompted by strong earnings and manufacturing data
to bid the market to its best one-day gain since the year's first
trading session.
The Dow Jones Industrial Average (DJI) ended 118.20 points
higher, up 1.2% to 10,185.53. The gains represented the Dow's
biggest rise in point and percentage terms since a 156-point gain
on Jan. 4.
The Dow and other market yardsticks opened with gains and
marched steadily higher through most of the session, finishing near
their session highs.
Some additional buyers entered the market following the
late-morning release of new data from the Institute for Supply
Management, which said U.S. factory-sector activity booked its best
performance in more than five years in January. Hiring continued to
recover and inflationary pressures quickened.
Monday's rally erased part of January's 3.5% slide in the Dow,
the biggest monthly decline since February 2009. The recent
pullback coincides with what has generally been a wave of
better-than-expected profit reports, though investors often bet
last month that share prices had factored in the strong
earnings.
"People were thinking everything was baked into this market,"
said strategist Joe Williams, of Commerce Trust Co. "But the
mentality is a little different today. People are more open to the
idea that the market might have gotten a little ahead of itself to
the downside, since we were at the bottom of the recent trading
range."
The Dow was led Monday by a 2.7% gain in component Exxon Mobil
Corp. (XOM), which posted better quarterly results than analysts
expected.
The S&P 500 (SPX) enjoyed an across-the-board rally in all
its sectors, pushing the index to an overall gain of 1.4%. The
basic-materials category was the strongest, up 3.7%. Energy rose
3%, while financials, technology, industrials, and the
consumer-discretionary sector were up more than 1% each.
Other economic data on Monday weren't as strong as the ISM
manufacturing data. The Commerce Department said construction
spending fell in December much more than expected, reflecting
commercial real estate weakness.
And while personal income rose by more than expected, climbing
0.4% in December, personal spending rose by 0.2%, less than
economists had predicted.
The reports continue a recent string of hot-and-cold data that
have kept the stock market in check. While most traders and
analysts are confident that the U.S. economy is recovering, there
is increasing worry that it is currently enjoying a one-time bump
as businesses restock their inventories following the recent
financial crisis.
In a worst case, that process would run out before consumers are
ready to step in to fuel the next wave of demand for goods to drive
corporate profits.
"The inventory building isn't a bad thing by any means," said
portfolio manager Bill Stone, of PNC Advisors in Philadelphia. "But
people are going to continue to look for more than just that to
hang their hats on."
Shares of commodity producers were helped Monday by comments
from analysts at Davenport & Co., who touted coal stocks in a
client note, citing upbeat outlooks issued by industry executives
at a conference last week. The report helped to push Massey Energy
(MEE) up 7.9%. Consol Energy (CNX) was up 7.2%
Metals producers rallied. Alcoa (AA) was up 5%. US Steel (X)
gained 6.5%. Freeport-McMoran Copper & Gold (FCX) rose
7.4%.
The Nasdaq Composite (RIXF) rose 1.1%. Its gains were limited by
a 5.2% slide in component Amazon.com (AMZN) after the online
retailer conceded defeat in a battle with publisher Macmillan over
the price of e-books.
Oil futures and gold futures climbed. The dollar weakened
against the euro but was higher against the yen. Treasurys fell,
with the two-year note (UST2YR) off 3/32 to yield 0.859% and the
10-year (UST10Y) note down 19/32 to yield 3.662%.